Is steam power the answer to our energy problems?

Anmar Frangoul | Special to
Closing the carbon cycle

The world's hunger for fossil fuels shows no sign of abating – despite the fact that we will eventually run out of them. But one German company is looking to cut our carbon ties.

In the U.S., coal accounted for roughly 39 percent of the 4 trillion kilowatt hours of electricity generated during 2013, comfortably outstripping natural gas, nuclear and renewables, according to the U.S. Energy Information Administration.

Read MoreSolar powered aircraft: A flight of fancy?

With this in mind, Dresden-based Sunfire is hoping to use renewable energy, water and carbon dioxide to "close" the carbon cycle and produce sustainable fuels that will lessen our reliance on fossil fuels.

The company describes its vision as "taking water from the ocean and carbon dioxide from the air and using regenerative electricity to convert them into liquid fuels… and gases."

Sunfire are working to produce a fuel that can fit seamlessly into the existing supply chain. A crucial part of its process is the use of what it describes as "steam electrolysis."

"Because we use steam, we need approximately 16 percent less electricity than normal, standard electrolysis," Sebastian Becker, Chief Technical Engineer at Sunfire, told CNBC's Sustainable Energy.

The technique works by turning water to steam, which is treated to remove oxygen and produce hydrogen. Carbon dioxide is taken from the atmosphere and mixed with the hydrogen to create what Sunfire describes as 'high-purity synthetic fuels', or 'e-fuels'.

Late last year, Sunfire inaugurated a demonstration rig in Dresden to show the world its work. The company says that its high temperature steam electrolysis technology can reach an efficiency of 70 percent.

Currently, Sunfire's rig can recycle about 3.2 tonnes of CO2 daily and they state that, "once brought into commission", it will be able to produce a barrel of fuel every day. Sunfire believe that the process can work on a larger, industrial scale and hope to commercialize operations in 2016.

Read MoreDoes Mars have the answer to storing energy?

"What we basically really do is… imitate nature," Christian v. Olshausen, Sunfire's CTO, told CNBC.

"Our vision is… to close the carbon cycle," Olshausen added. "[We can] use CO2 from air. Water is widely available – we can use sea water, we can use any kind of water – and renewable energy is something that we can derive from wind, from solar."